Dealing with uncertainty: focus, planning and being a chief realist officer

Published: December 22, 2017 - 10:31 am

Uncertainty is a key aspect of the new normal for today’s chief financial officers. Yet according to the Crain’s 2017 CFO Forecast Study, about 80% of participants are optimistic about their company’s prospects during the next 24 months, while 70% remain optimistic about the overall U.S. business climate during that time period. While close to half of participants said they believe there will be significant economic downturn, CFOs seem unfazed by the uncertainty and plan to move forward regardless of how the landscape may alter.

“The economy is fundamentally doing well. We lived through the earlier crisis, when real estate was so inflated we knew there was a bubble, but there’s no fundamental bubble out there now,” said Christine Fenske, managing partner of the New York office of Baker Tilly.

“We track the key indicators, and they’re positive,” said Stephen Foley, head of corporate banking at TD Bank. “It does feel like a false bottom, but the indicators seem to show things are strong. I think executives want more visibility before they pull the trigger on certain things. Catalysts are coming, such as tax reform. We’re looking at the return of normalized interest rates. What that translates to in the equity markets is uncertain, but there seems to be a lot of positive activity out there that can be interpreted to make decisions.”

Part of the way to ensure success amid uncertainty is to have a contingency plan. If customers stop buying, a company has to be able to make corrections in its labor force, said Fenske. “I need good performance management so I can figure out what to do,” she added. “It’s making decisions and stress-testing them so I know what lever I can pull and which I can’t. If a 10% correction in the market causes a domino effect, does it crush me?”

“It’s about being nimble, being able to pivot in another direction,” said Foley. “Long growth has fallen through the floor for banks, so we have to find new ways to capture products-and-services business from clients. We try to think outside the box—and grow the top line.”

For Jim Cusumano, chief financial officer of Brighton Health Plan Solutions, it’s about knowing what buttons you can push. “If there’s a downturn that’s negatively affecting your top line, it’s key to know your staffing ratios, numbers—what leverage you have to adjust so you can preserve the profitability of the organization,” he said.

Controlled growth may well be the secret sauce for companies in the year ahead. “There’s control over investment strategy and performance, and a strong understanding of where things are headed,” said Nick Araco, CEO of The CFO Alliance. “And an ability to pivot, that’s the new definition of controlled growth. Flat is not the new up, like it was 2008 or 2009—when the CFO Alliance was basically a therapy group. Nobody is going to seriously commit to being flat for the year ahead,” he said.

Being a CFO means you’re quick to respond to change and unfazed by previous setbacks. In other words, you’re a “chief realist officer.”